GSTN Advisory on Interest Computation in GSTR-3B: Key Points for Taxpayers & Professionals

GSTN Advisory on Interest Computation in GSTR-3B: Key Points for Taxpayers and Professionals

The GST Network (GSTN) has recently issued an advisory introducing important changes in the manner in which interest is computed and collected in GSTR-3B, applicable from the January 2026 tax period onwards. While the advisory aims to align system computation with statutory provisions, it also places greater responsibility on taxpayers to self-assess the correct interest liability.

This article attempts to explain the advisory in straightforward terms, highlight the practical implications for ongoing compliance, and examine a common fact pattern to understand how interest will now be computed on the GST portal.

Statutory Background – Section 50 and Rule 88B

Interest on delayed payment of GST is governed by Section 50 of the CGST Act, 2017, read with Rule 88B of the CGST Rules, 2017. The proviso to Rule 88B(1) provides that interest shall be payable only on the portion of tax paid in cash, after adjusting eligible input tax credit.

In practice, taxpayers have often faced differences between statutory computation and portal-based calculations, leading to avoidable confusion and disputes. The latest GSTN enhancement attempts to bridge this gap.

Key Change: Revised Interest Computation in GSTR-3B

From January 2026 onwards, the GST portal has enhanced interest calculation in Table 5.1 of GSTR-3B by granting the benefit of the minimum cash balance available in the Electronic Cash Ledger (ECL) during the delay period. Revised Interest Formula (as per GSTN)

 Interest = (Net Tax Liability – Minimum Cash Balance in ECL from due date to date of debit) × (Number of days delayed / 365) × Applicable Interest Rate

In simple words, if a taxpayer already had sufficient balance lying in the cash ledger during the delay period, interest will not be charged on that portion.

System-Computed Interest – Important Caveat

• The interest auto-populated in Table 5.1 of GSTR-3B will be non-editable downward.
• Taxpayers cannot reduce the system-calculated interest.
• However, the auto-populated interest represents only the minimum interest payable.
• Taxpayers are expected to recompute interest independently and increase the amount, wherever required.

This makes it clear that responsibility for correct computation continues to rest with the taxpayer.

Practical Illustration: How Interest Will Now Be Calculated

Illustrative facts:

• Tax period: January 2026
• Due date of GSTR-3B: 20 February 2026
• Actual date of filing and payment: 10 March 2026
• Net GST liability: INR 5,00,000
• ITC available and utilised: INR 3,50,000
• Net cash liability: INR 1,50,000
• Minimum cash balance in Electronic Cash Ledger from due date to payment date: INR 80,000
• Delay: 18 days
• Applicable interest rate: 18% per annum

 Interest computation:

Net cash liability = INR 1,50,000

Less: Minimum cash balance in ECL = INR 80,000

Effective amount for interest = INR 70,000

Interest = INR 70,000 × (18/100) × (18/365)

Interest payable ≈ INR 620 (approx.)

 Practical takeaway: Although the total cash liability worked out to INR 1,50,000, interest is effectively payable only on INR 70,000, as INR 80,000 remained continuously available in the electronic cash ledger during the period of delay.

Auto-Population of Tax Liability Breakup Table

Another significant enhancement relates to the Tax Liability Breakup Table in GSTR-3B. From January 2026 onwards:

• The portal will auto-populate tax liability pertaining to earlier tax periods but reported in the current period.
• The breakup will be based on the document date reported in GSTR-1 / GSTR-1A / IFF.
• This improves transparency and helps tax officers identify delayed reporting vis-à-vis delayed payment.

Interest Collection through GSTR-10 (Final Return)

For cancelled registrations, GSTN has clarified that:

• If the last applicable GSTR-3B is filed after the due date,
• Interest on such delayed filing shall be levied and collected through GSTR-10.

This is a critical compliance point often missed by taxpayers exiting the GST regime.

Practical Takeaways for Taxpayers and Professionals

1. Do not blindly rely on auto-populated interest figures in GSTR-3B.

2. Maintain proper records of daily cash ledger balances, especially during delayed filings.

3. Recompute interest independently under Rule 88B before filing.

4. Be cautious while reporting past-period supplies in current returns.

5. For cancelled GSTINs, ensure interest implications are reviewed before filing GSTR-10.

Concluding Remarks

The GSTN advisory is a welcome step towards aligning system-based interest computation with statutory intent. However, it also signals a shift towards greater self-compliance and accountability. While the portal now provides a fair starting point, taxpayers and professionals must exercise diligence to avoid future notices and disputes.

Accordingly, while system-driven computation may ease compliance, it cannot be treated as a substitute for statutory verification and professional judgment.

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Author’s Note: This article is for educational purposes only and does not constitute legal advice. Readers are advised to refer to the CGST Act, Rules, and official GSTN advisories before taking any compliance decision. For any query related to above article, or if you face any issue in Income Tax, GST, SEZ, STPI, MCA compliances etc., especially in cases involving legal proceedings, notices, litigation, or demand matters. Please feel free to contact us at the details mentioned below:

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